In Alabama, A Public Hospital Serves the Poor — with Lawsuits

More than a century ago, Alabama enshrined a basic protection in the state’s constitution shielding its poorest citizens from being forced to pay debts they couldn’t afford.

But a public hospital in the mostly rural southeast corner of the state has found a way around the law. Before patients can receive treatment at Southeast Alabama Medical Center, they must sign a form waiving that legal protection, clearing the way for the facility to seize funds from their pay or bank accounts to cover medical debts.

ProPublica and NPR reported last week that nonprofit hospitals, which are legally required to offer discounted care to the poor, often sue low-income patients and garnish hefty portions of their pay.

But ProPublica found similar tactics are wielded by public facilities that often serve as hospitals of last resort.

About a fifth of U.S. hospitals are public, operating under a patchwork of local and state authorities and balancing two potentially competing mandates: They must provide care to those who can’t get it anywhere else while spending as little public money as possible.

Southeast Alabama Medical Center (SAMC), the only public hospital in the small city of Dothan, meets the first mandate by having a generous financial assistance policy. But it also ranks among the area’s most aggressive debt collectors, relentlessly pursuing payment even from patients who would have been eligible for reduced or free care had they applied for it.

Over the past three years, SAMC has filed more than 4,000 suits against its patients. And those who tumble through the hospital’s safety net often are stuck not only with care billed at full price, but with interest and legal fees from the court action.

Other public hospitals in Alabama and other states use similar tactics. In Missouri, two of the three hospitals that file the most debt-collection suits are public.

Chi Chi Wu, an attorney with the National Consumer Law Center, said it is “outrageous” for a public entity to take “this kind of heavy-handed action” against poor people already grappling with unavoidable health care emergencies.

Ronald Owen, SAMC’s chief executive, said the hospital has “the mission and the responsibility” to care for the uninsured. Hospital staffers, he said, try to notify patients who qualify for financial assistance. “We’re going to be as compassionate as we can.” But there is a limit.

“Now, if you don’t identify yourself and you don’t take advantage of that, then we’re going to pursue collection,” he said.

Before Treatment, Sign Here

On paper, SAMC’s financial assistance policy covers just about any lower-income patient. Uninsured patients with income up to four times the poverty line ($46,680 for individuals with no dependents) qualify to have their bill slashed. Those earning below twice the poverty line qualify for free care.

But before checking in at SAMC, patients are handed a “Condition of Treatment” form. It is two pages of the sort of waivers and releases that have become common in American healthcare. There is no mention of financial assistance on the form.

In the midst of item number seven, “Financial Agreement and Assignment of Insurance Benefits,” are two crucial details. Near the end of one sentence, the patient agrees to pay “reasonable attorneys fees.” And then, there’s this: “Further, the undersigned waives as to this debt all rights of exemption under the constitution and laws of Alabama or any other states as to personal property.”

It is the sort of language only a lawyer might understand. But when low-income patients sign their initials at the end of the item 7, they waive their right under the state constitution to protect $1,000 per paycheck from seizure if they are sued over a debt. Typically, the protection ensures that workers who earn around $30,000 or less annually are immune from garnishment.

Even without the waiver, SAMC could still sue low-income patients and attempt to garnish their pay. That’s because the $1,000 protection isn’t automatic—it must be asserted by the debtor. Usually, only lawyers know about it, said Sara Zampierin, an attorney with the Southern Poverty Law Center.

With the waiver in hand, SAMC is assured that should a lower-income debtor ever attempt to invoke the state law, the hospital can proceed with garnishment.

Using such a waiver would be problematic in any context, said Zampierin. But a hospital “doing this at a time people are under great stress” and desperate for care is particularly objectionable.

SAMC declined to answer questions about the waivers, saying instead in a statement that its practices complied with all applicable laws.

“How am I gonna pay my bills?”

Suffering from a kidney infection, Annie Helms of Dothan signed and initialed the “Condition of Treatment” form in August 2009 prior to receiving care at SAMC. A single mother who then worked as a nanny, she was a prime candidate for financial assistance. But no one at the hospital told her about it, she said.

SAMC executives say they publicize the hospital’s financial assistance policy by putting up signs, posting information on the website, and including a line at the bottom of billing statements.

Yet the low-income patients the hospital sues commonly don’t understand they are eligible for aid, said Mitchell Dobbs, an attorney at Legal Services Alabama in Dothan who often represents SAMC patients in court. The notice on billing statements, for example, is in tiny print at the bottom and only says, “You may be eligible for financial assistance under the terms and conditions the hospital offers to qualified patients.”

When Helms, 35, could not pay her more than $700 bill, SAMC referred her account to the collection agency that handles its past-due accounts. The company is owned by a local law firm, Lewis, Brackin, Flowers and Johnson. The firm rejected Helms’ offer to pay $25 a month towards the debt, she said, and then sued her, serving her with the papers at the school where she had found work as a custodian.

“I was actually in tears,” she said, “because you know I’m a single mom with two kids and I’m like, how am I gonna pay my bills?”

But that wasn’t all. As part of the suit, an attorney with Lewis, Brackin asked to tack a “reasonable attorney’s fee” onto Helms’ debt, which he said was 25 percent of the balance owed, or an additional $219.

A review of SAMC suits shows the firm has asked for and received the same 25 percent fee in dozens of cases, sometimes adding several thousand dollars to patients’ debts.

Lewis, Brackin did not respond to a request for comment. In a statement, SAMC declined to discuss Helms’ case or any other “in order to protect the privacy of its patients.”

Helms’ balance came to almost $900, since the suit also included an earlier, smaller bill that was outstanding, plus the attorney fee and $85 in interest.

SAMC began taking a quarter of her take-home pay after she started a new job making about $20,000 a year. Things were already tight, Helms said, but the deductions meant she couldn’t cover her basic bills. “My car almost got repo-ed. It was a disaster, honestly.”

Unfortunately, Helms said, by that time, she had been forced to make another visit to SAMC after she came down with the flu.

So, one month after Helms finally finished paying off the debt from the first garnishment, in November 2012 SAMC filed a second suit for more than $4,000 in outstanding bills. With Lewis, Brackin’s $1,000 attorney fee and interest, she faced a debt of $5,400 and years more of garnishments.

Public Hospitals Often Sue

Since 2012, SAMC has filed well over 1,000 debt collection cases each year. A ProPublica review found that among those whose wages had been garnished were low-level employees of a local poultry processing plant, Walmart and a variety of fast food restaurants.

Taking it one step farther, SAMC sometimes cleans out former patients’ bank accounts as well. In one case, after securing a judgment of $10,700, the hospital cleared the remaining $859 out of the debtor’s Wells Fargo account. Although Alabama state law caps wage garnishments at 25 percent of after-tax income, there are no such limits on what creditors can take from a debtor’s bank account.

Only a handful of other Alabama hospitals file suits against patients as often as SAMC, according to ProPublica’s review of state court filings. Few of those hospitals, however, added in attorney fees or required a waiver of Alabama’s protections against garnishment, the review showed.

The most frequent filer was DCH Health System, a public hospital network that operates four hospitals in western Alabama, including Tuscaloosa. Together, its hospitals filed more than 4,400 suits between 2012 and November of this year.

In a statement, DCH spokesman Brad Fisher said that the hospitals follow “industry practices to ascertain a patient’s ability to pay” and attempt to deal with debts through payment plans.

Also near the top of the list was a for-profit chain, Community Health Systems, which operates 11 hospitals in the state, including the only other hospital in Dothan. Flowers Hospital, which has about half the number of beds as SAMC, has filed more than 2,000 suits against patients since 2012.

CHS did not respond to a request for comment.

Debts Often Lead to Bankruptcy

SAMC’s Owen said the financial reality for public hospitals forces them “to be responsible and try to collect the debts that are there.” The hospital’s county-appointed board has supported these efforts, he said.

SAMC has been in the black for several years—last year it had a profit of $9.3 million—but Owen said it’s been getting more difficult for the hospital to maintain that. Medicaid and Medicare payment rates are low, he said, and Blue Cross Blue Shield insures a huge portion of Alabamians, giving the company substantial leverage to negotiate for lower prices at the hospital.

The 2010 Affordable Care Act hasn’t made a sizeable impact on the hospital’s financial situation, Owen said, in part because Alabama is not among the states that have expanded Medicaid, so only extremely poor adults qualify for the program.

Southeast Alabama Medical Center is the only public hospital in Dothan, Ala. (Bryan Anselm for ProPublica)

Public hospitals “really need to look at what they’re collecting from some of these patients who may have limited financial means,” said Mark Rukavina, a consultant and expert on hospital billing issues. In most cases, he said, the damage to patients’ lives is considerable, while the dollars extracted most likely aren’t.

Dobbs, the Legal Services Alabama attorney, said if SAMC provided financial aid to all the patients eligible for it, he and his colleagues would rarely have any of them as clients. Only low-income clients qualify for the office’s free services.

Typically, by the time SAMC patients reach his office, Dobbs said, their wages have been garnished and they are desperate. Often bankruptcy is the only way out of a debt that began with an unavoidable health crisis.

Helms, who found her way to Legal Services Alabama after being served with her second SAMC suit, was told by Dobbs that it was her best option. She declared bankruptcy last year.

SAMC debts are “probably the number one reason we file bankruptcies in this office,” Dobbs said.

It’s not an easy decision, he added. Despite the threat of not being able to support their families, his clients often are mortified by their inability to meet their financial obligations.

“Somebody who went to the hospital, feeling shame because they can’t pay that bill? It makes me sick,” Dobbs said. “There’s no reason to be ashamed. Sometimes it’s the other side that ought to be ashamed for not helping more.”